Welcome to the 2016 winter edition of Mineral Exploration magazine. Mineral exploration is the process of finding commercially viable concentrations of minerals to mine. But ask any explorer in B.C. and you will invariably be told that mineral prospecting and exploration is far more than this. It is a passion, often a lifelong quest to discover that elusive deposit and to drive it to success – a phenomenal journey fraught with ever-increasing complexities that demands tenacity, hard work and more than a just a little luck.

Simply put, exploration is the lifeblood of the mining industry. And despite the boom and bust cycles that typify our industry, B.C.’s explorationists have, over the years, discovered deposits that have both sustained our industry and positively impacted economies and societies here at home and around the world. It is this leadership, coupled with our resilience and innovation, that will ensure the continued success of our industry going forward.

As a sense of optimism returned to the mineral exploration sector in 2016, I was reminded of a famous quote by Winston Churchill that I often heard as a child: “Success is not final, failure is not fatal: it is the courage to continue that counts.” Our industry has struggled with disastrous financial and market conditions over most of the last four to five years. Those exploration companies that have survived, and even possibly managed to take advantage of a counter-cyclical market, will now have an opportunity to capitalize on the upturn.

While the initial signs of recovery are encouraging, any “recovery” is still in its early stages, and its reach in the sector has been uneven and commoditydependent – led by higher prices for gold, in particular, as well as zinc and metallurgical coal. At mid-2016, mining companies once again comprised more than 50% of the market capitalization of the TSX Venture Exchange (TSX-V), up from 36% a year before, yet still down significantly from the market high in 2008. Further, a recent PwC study1 shows that 100 junior exploration companies accounted for fully 60% of the TSX-V’s current market capitalization, and more than 60% of proceeds raised from new financings. Most of these companies hold gold projects. Prices for copper and nickel, on the other hand, are just beginning to show signs of life. As a result, many companies that are focused on these and other important commodities continue to find it challenging to raise new capital to advance their projects.

Access to capital by junior companies is fundamental to exploration success. Research by Schodde2 demonstrates the essential link between junior companies and mineral discovery: over the decade to 2014, junior companies made 71% of all major discoveries in Canada. As the juniors struggled to access new capital from 2012 to 2015, discovery rates were cut in half.

As markets return, there is a real opportunity for governments in B.C. and those across Canada to affirm policies, as well as take further steps to support the exploration industry in the highly competitive global environment. Demonstration that exploration and development projects can be advanced efficiently, without undue roadblocks, underpins all investment. Without that confidence, capital will not flow in the quantum required to maintain and grow the sector or its contribution to society.

The importance of flow-through financing to junior companies cannot be overstated. Introduced some 60 years ago to assist exploration and development companies to advance projects, especially through commodity downturns, its success has been undeniable. More than 80% of respondents to a recent PDAC survey stated that flow through shares (and the associated 15% federal Mineral Exploration Tax Credit for individuals) are critical to their survival and a direct incentive to attracting and sustaining further investment. Sixty-one per cent said the dollars raised have led to new discoveries, providing economic stimulus in typically remote areas of the country that include Aboriginal communities.

In fact, flow-through offerings have accounted for more than 67% of all mineral exploration financings on Canadian exchanges over the past decade. Finance Canada has estimated that the flow-through share system stimulates $3 in exploration spending for every $1 in foregone tax revenue.3 So while we applaud the B.C. government for its renewal of flow-through financing, the federal government’s current review of its policy is a concern. Removing an incentive to investment such as flow through financing at this time could undermine the nascent recovery in our sector, whereas maintaining it would provide a key signal to the international investment community that Canada welcomes mineral exploration and mine development.

Regulation and compliance in the capital markets needs to be re- examined in order to find new, innovative and cost-effective approaches to raising capital, and to reduce corporate overhead costs that redirect capital away from the exploration activities. We also need to continue to reform Canada’s fragmented and complex securities regulatory system to support new investment, and maintain and expand B.C.’s and Canada’s global leadership in raising mining equity finance for ventures in B.C., Canada and abroad.

AME’s Taxation, Securities and Investment Committee is actively reviewing issues and opportunities in this area, and collaborating with AME staff, the Board and other associations such as PDAC to alert governments about industry concerns and find creative and economical means to improve access to capital. AME has recently made pre-budget submissions to the provincial and federal governments that you can read.4 The staff, along with our Board and all of its committees, are here to listen to and support the AME membership. If you have comments or ideas, I hope you’ll let us know.

Over the past year as Board Chair, I have had the opportunity to meet with AME members and our many volunteers across B.C. It has been a privilege to take a lead role in discussions with municipal, provincial, federal and First Nations governments on your behalf, and to work to increase public understanding of mineral exploration, and what helps or hinders us from doing our work and creating new wealth through mineral discovery. I believe we have turned a corner in 2016 and am excited about what lies ahead. I would like to extend an invitation to each of you to join us at Roundup 2017 to celebrate our successes, and discuss the opportunities and challenges that lie ahead in a year certain to reward the passion, tenacity and vigour of B.C. prospectors and explorers.

  1. pwc.com/ca/canadianmine, Junior mine 2016: Signs of life
  2. minexconsulting.com/publications/R Schodde PDAC Conf March 2015 FINAL.pdf, slide 13
  3. AME’s presentation to the House of Commons Standing Committee on Natural Resources (RNNR), October 20, 2016
  4. amebc.ca/policy/government-budget-submission